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Expect attractive offers on retail loans

Retail loans will continue to boost the performance of both the public sector and private banks in the fourth quarter of the financial year 2014-15.

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Retail loans will continue to boost the performance of both the public sector and private banks in the fourth quarter of the financial year 2014-15.

With delinquencies in the retail portfolios lower than the corporate and the small and medium enterprises banks continue to be confident about disbursing retail loans specially home loans which are secured loans.

The absence of corporate loan growth with companies not coming for fresh credit banks have no option other than to put money other in small retail loans or in government securities. To push retail loans, banks may come out with offers soon, say experts.

Ananda Bhoumik, a senior director at Fitch's Indian unit India Ratings and Research, told dna, "Retail loans will continue to grow at an encouraging pace in fiscal 2016 as the delinquencies are at historical lows of about 1% of the total home loan advances. Consumer loans growth is encouraging, except for education loan where the delinquencies are high."

SBI, which continues to pace as the biggest retail player, is sanctioning home loans worth Rs 200 crore a day and financing about 1,000 to 1,200 cars a day. The banks home loan book was Rs 152,905 crore at the end of the end third quarter ended December 31, 2015, while the car loans were at Rs 30,701 crore.

A senior SBI official said, "Retail credit growth will be higher than growth in other segments, and we will report higher retail growth numbers in the fourth quarter."

Jairam Sridharan, president – retail lending & payments, Axis Bank told dna, "Axis plans to grow its retail book from 38% of its total advances to 43% of total advances in the next two years. Retail customer continues to demonstrate strength. Home loans, credit cards even auto loans from the low base rates of last year are showing encouraging signs of growth."

Union Bank of India which has the lowest home loan rate at 10% after it revised its base rate in January 2015.

A senior official of Union Bank of India said, "We are sanctioning Rs 20 crore to Rs 100 crore loans a day on an average and car loans of about Rs 12 crore to Rs 15 crore a day. The delinquency in our home loan portfolio is the lowest at 1.5% of total advances, making it one of the safest advances. We also have over 200 builder tie-ups so the bank is able to showcase properties to the customers. Retail will continue to comprise over 13% of the total bank credit."

According to RBI data, the home loans are growing at the rate of 17%, while for many industry segments like micro and medium and small industries year-on-year (yoy) credit growth as on January 25, has fallen to 12.7% from 25.3% in the year-ago period. Though the yoy growth in personal loans fallen to 15.8% during this period from 16.6% a year ago, slackening in pace but the growth is healthy compared to other industry segments. The yoy growth in home loans has been 16.7% to Rs 613,700 crore while it was 18.3% a year ago. The credit card portfolio of banks have shown an exponential yoy growth to 22.8% to Rs 31,100 crore from 0.3% a year ago.

Even private sector lenders like ICICI Bank and Axis Bank are seeing a strong growth in the retail book particularly in the home loan segment.

In an analyst conference call after the third quarter results ICICI Bank had said, "As far as the home loans are concerned, we have significant competitive advantages in that segment and also from an overall capital and diversification perspective, it is a very good book to grow."

At the end of the third quarter ended December 31, the bank's outstanding home loans were Rs 84,425 crore. Its retail advances grew 25.6% yoy.

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